African Thoughts: June 04, 2012

The old adage “sell in May and go away” was definitely true this year as global investors ran for the hills and switched the risk switch completely off. Developed markets took an absolute bath with the likes of the Dow Jones Industrial average falling in excess of 8%. The way this risk aversion manifested itself in Africa was by means of a big drop in volumes across the major bourses. There were however one or two days last week where there was a spike in volumes in a few of the markets, this however should be taken with a pinch of salt as it was a attributed to a few large crosses. Below is a list of the best and worst performing markets from the African continent from last week.

Morocco:

Morocco was one of the few bright lights last on the continent last week with the market managing to gain 1.77%. There was no real driver behind the move higher, one can only speculate that investors sought to pick up stocks at fairly low levels after the recent slump (after the MCSI re-weighting). In other news the price of fuel increased by MAD2 per litre last week.

Zambia:

Zambia managed to close in positive territory with the LuSE gaining 0.6%. Stanchart was one of the biggest contributors towards value traded last week thanks to a large cross on Tuesday while Zambeef help the market higher, managing to gain 3.7% to close at 2,800. Natbrew released results which saw revenues fall by 4% from a year earlier.

Kenya:

Kenya was a surprise last week with the market managing to stage a gain of 0.4% albeit on rather thin volume (as the market was closed on Friday for Madaraka Day). SCAN group fell 2.1% last week as parliament considered cutting Government advertising by 25%. The Government is the second biggest advertising spender after Safaricom. Kenya Airways will announce the results of its rights issue on 6th of June. Inflation figures released last week decline to 12.2%. The Monetary Policy Committee will meet this week to decide on the Central Bank Rate.

Egypt:

Egypt was the worst performing market last week with the EGX falling a staggering 5.74% on very thin volume though. There was no real stock specific news that drove the market last week except for the fact that foreigners were mostly absent which caused liquidity to dry up. The news that dominated the headlines was the decision for Mubarak to be sentenced to life imprisonment (25 years).

Nigeria:

The Nigerian market struggled from both a volume and performance point of view last week with the ASI falling 1.21%. Banks were a major drag on the market last week with the likes of Zenith, Skye Bank and FCMB coming under a fair amount of pressure from institutional investors. Foreign participants were noticeably absent from the market. Oando announced that they had signed a farm-in agreement to aquire a 40% stake in the Qua-Iboe field.

Tunisia:

Tunisia was not spared in last week’s sell-off with the market falling 1.2%. Standard and Poors downgraded 5 Tunisian banks last week: STB, BH, ATB, BTE and BTK. Regarding BH, BTE and STB the reasons behind this downgrade according to the agency were the high participation of the Tunisian government into their capitals, BTK was sanctioned according to the agency due to its smaller size which puts it at a higher risk when compared to bigger banks if the economic situation had to worsen, while the reason behind ATB’s downgrade was the fact that its investment portfolio is high on government bonds.

Zimbabwe:

Zimbabwe came under some pressure last week with the Industrial Index falling 0.98% thanks to moves lower in the likes of Delta and Econet which fell 2.13% and 5% respectively (the two names make up about 37% of the Industrial Index). On the mining front the Resource Index fell 0.51% on the back of Hwange falling 3.85% which accounts for 53% of the resource sector. The market waited for the resolutions of the SADC summit held in Angola over the weekend to come up with a clear solution for Zimbabwe’s political outlook so that they would structure their portfolio investments with clarity. However, nothing new came out of the meeting save to reiterate that elections be held only after the full implementation of all outstanding issues in the GPA which could mean that Elections will only be feasible next year or later despite the ruling party insisting that they will be held this year.